Bruno Company accumulates the following data converning a mixed cost, using mile

Question

Bruno Company accumulates the following data converning a mixed cost, using miles as the activity level.

.......................Miles Driven......................Total Cost

January........... 8,000...................................$14,150

February..........7,500...................................$13,500

March..............8,500.................................. $15,000

April................. 8,200................................. $14,490

Compute the variable - and fixed-cost elemts using the high-low method.

Explanation / Answer

Variable cost per mile using high low method = (Difference between Highest total cost and Lowest total cost) / (Difference in highest activity level and lowest activity level)

= ($15,000 - $13,500) / (8500 - 7500)

= $1,500 / 1000 miles

= $1.50 per mile

Applying the variable cost rate per mile to 8500 miles, total variable cost is = 8500 x $1.50

= $12,750

Fixed component on 8500 miles = Total cost - Variable component

= $15,000 - $12,750

= $2,250

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